Analysts Say GM Needs Product Appeal

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DETROIT (Reuters) - In an industry where 'product is king,' General Motors Corp. is in dire need of attractive new vehicles to rule the road, analysts say, mostly dismissing a move by the ailing auto giant to cut jobs and close plants to save billions of dollars a year.

The world's largest automaker on Monday said it will cut 30,000 North American manufacturing jobs and close 12 operations as part of a broader restructuring plan.

"I don't think the cuts are enough, but it's not a matter of whether they are enough or not, it's a matter of whether or not the company will create the culture of innovation GM needs to pull the company out of a tailspin," automotive expert Charles Fleetham said.

GM has been struggling with high health-care and commodities costs, loss of U.S. market share to foreign rivals and stalled sales of large sport utility vehicles due to high gasoline prices.

This year alone, the carmaker has lost $4 billion while its shares have bled more than 40 percent of their value.

GM's new 2007 models include a new Chevy Tahoe, a new professional grade GMC Yukon and Yukon Denali and a new Cadillac Escalade -- all four are big SUVs and will be rolled out in the first quarter of 2006.

"The overall product mix for 2006 is reflective of the short-term thinking of GM," Fleetham said. "GM's overall offerings are more representative of the 1999 mindset than the needs of today. The consumer of 2006 has environmental concerns, is mindful of fuel economy and is more style-conscious."

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It's easy to criticize, but this comment doesn't quite ring true to me:

"The overall product mix for 2006 is reflective of the short-term thinking of GM," Fleetham said. "GM's overall offerings are more representative of the 1999 mindset than the needs of today. The consumer of 2006 has environmental concerns, is mindful of fuel economy and is more style-conscious."

GM shouldn't walk away from their biggest profit-makers. They should do everything they can to protect that market -- and I think the 2007's are a step towards that. Matter of fact, if they had fold-flat rear seats, I think they'd be far-and-away head of the class. Even without that, they certainly are better than anybody's else's trucks and suv's. Last time I looked, GM didn't give up on cars at all: witness the Impala, Monte, Cobalt, Aveo and Malibu.. that's 5 cars right there -- and that's only Chevrolet!! Where was this author's "forward-thinking" 18 months ago when gas prices were cheap?! The truth is, there wasn't any; which is why Nissan rolled out their Titan/Armada, why Toyota is putting out a 268hp Rav4, why Honda produced a craptacular-gas-mileage Ridgeline, and why Toyota is building an even-larger Tundra (with a larger engine). That goes to show their was forecasting was an industry-wide issue. Granted Toyota and Honda has their hybrids -- but only in limited capacities.

As it is, there will always be a market for full-size vehicles; whether it be trucks, suv's or vans. GM's in a better position that anybody (fuel-economy-wise) to capture those sales. I'm sorry if that doesn't fit into this author's pre-concieved "GM=bad" mindset.

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I agree. Most new products from the Asian brands have been vehicles that compete directly with those that GM plans to remodel for 2006. It's bad advice to tell GM to ignore the onslaught of large SUVs & Pick-ups that have recently emerged in this "environmentally & economically" concerned market.
If it's truly and honestly a bad idea, then the analysts should have been condemning Toyota and Nissan over the past 5 years for building new plants dedicated to large trucks and SUVs.

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The Cobalt is the main connection to the comments you didn't like. The Cobalt is not all that stylish...not like the Scions or the Mazda3 or the new Civic.

Granted Toyota and Honda has their hybrids -- but only in limited capacities.

Toyota plans on selling over 100,000 hybrids in the US this year. Honda will add another 50,000 or so. That's not all that limited. GM's truly limited number of "hybrid" pickups don't really count due to their tiny numbers and un-hybrid-like design.

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It's easy to criticize, but this comment doesn't quite ring true to me:
GM shouldn't walk away from their biggest profit-makers. They should do everything they can to protect that market -- and I think the 2007's are a step towards that. Matter of fact, if they had fold-flat rear seats, I think they'd be far-and-away head of the class. Even without that, they certainly are better than anybody's else's trucks and suv's. Last time I looked, GM didn't give up on cars at all: witness the Impala, Monte, Cobalt, Aveo and Malibu.. that's 5 cars right there -- and that's only Chevrolet!! Where was this author's "forward-thinking" 18 months ago when gas prices were cheap?! The truth is, there wasn't any; which is why Nissan rolled out their Titan/Armada, why Toyota is putting out a 268hp Rav4, why Honda produced a craptacular-gas-mileage Ridgeline, and why Toyota is building an even-larger Tundra (with a larger engine). That goes to show their was forecasting was an industry-wide issue. Granted Toyota and Honda has their hybrids -- but only in limited capacities.

As it is, there will always be a market for full-size vehicles; whether it be trucks, suv's or vans. GM's in a better position that anybody (fuel-economy-wise) to capture those sales. I'm sorry if that doesn't fit into this author's pre-concieved "GM=bad" mindset.

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One ting forgotten in all the hand wringing, is that GM needs to mke their plants flexible.
No need for plants scattered all over making one body style, with the excess going to Rental fleets.
And, to those that claimed "GM is going to re-tool and switch back to BOF RWD cars" by 2008, what do they say now??

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No-one said BOF, although many seemed to wish they would (the same people who killed the 3.7 L DOHC engine for the GP). RWD does seem to be coming in a bigger way than anticipated. Beside flawed product planning (and I mean details most of you aren't concerned about), common to most companies including Toyota, GM's biggest problem is getting the best from suppliers in technology and materials. Ford seems to be addressing this vigorously with a new focus on good supplier relations, GM not yet.

I'll be happy to see RWD make a big return at GM. It's one of their strengths. They never should have let it go. GM's product decline started with the '80 X cars, imo, and they're only recently coming up with truly appealing mainstream FWD cars (with a few exceptions, "Aurora" being one).Edited November 23, 2005 by ocnblu

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Toyota plans on selling over 100,000 hybrids in the US this year. Honda will add another 50,000 or so. That's not all that limited. GM's truly limited number of "hybrid" pickups don't really count due to their tiny numbers and un-hybrid-like design.

First off: "un-hybrid like design?" When a vehicle can switch between battery-power or gasoline, it's a hybrid. GM's pickups do that (when stationary)--so yes, they ARE a true hybrid--they aren't propelled by an electric motor (that's called a "full hybrid"). GM's commercial full hybrids won't be out for another year or so.

My point wasn't to say that Toyota/Honda didn't have hybrids -> my point was to illustrate that Toyota/Honda put more effort into larger engines and larger vehicles than they do the hybrids. How telling is this: Honda sells 50k hybrids a year, and the un-fuel efficient Ridgeline will sell 50k this year. Which has gotten more press? The Ridgeline or the hybrid? How many Honda hybrid commercials have you seen this week? Month? Year? Compare that to the Ridgeline commercials. Honda isn't pushing green -> they are pushing their Ridgeline. And yes, 150k units/year IS a limited quantity; especially when you realize US auto sales reached 16+ million units last year.

My comments were meant to illustrate that industry-wide forecasting didn't predict the high gas prices we just experienced -- and not to marginalize Toyota/Honda hybrid efforts (IMO, they are doing just fine on that by themselves).
Edited November 23, 2005 by cmattson

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First off: "un-hybrid like design?" When a vehicle can switch between battery-power or gasoline, it's a hybrid. GM's pickups do that (when stationary)--so yes, they ARE a true hybrid--they aren't propelled by an electric motor (that's called a "full hybrid"). GM's commercial full hybrids won't be out for another year or so.

Toyota and Honda couldn't possibly have anticipated the surge in demand for hybrids. But they are in the market...outside of Ford, nobody else is.

And GM's truck is NOT a hybrid. It's a ICE truck with a start-stop feature. Volkswagen offered this on diesels a quarter century ago...and nobody called it a hybrid then or now. Only GM has the nerve to say this is a hybrid.

A hybrid uses electric motors to POWER the vehicle and GM's trucks do not do this. They are NOT hybrids.

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Okay, take the Prius -> it's demand has been high since it's inception 2 years ago. Unlimited ca$h Toyota can't ramp up production in 2 years? Didn't we have an article about Toyota raving about taking a vehicle to production in 18 months time just a couple of months ago? Don't we see endless articles on how flexible and how efficient the Asian automakers are? I'm not willing to let them have it both ways. In the automotive market place 2 years is a long time. Like it or not, expectations have it that manufacturers are to design and build new cars in 4 years and are expected to refresh models every 2 years.

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"I don't think the cuts are enough, but it's not a matter of whether they are enough or not, it's a matter of whether or not the company will create the culture of innovation GM needs to pull the company out of a tailspin," automotive expert Charles Fleetham said.

Of course they're not enough.. they never are unless they involve a division.

"A painful cycle of restructuring, waning profitability and further restructuring is likely to characterize GM's future," he said.

Until an imminent death..... Geez man, I thought the title said "Some Optimism"

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Okay, take the Prius -> it's demand has been high since it's inception 2 years ago. Unlimited ca$h Toyota can't ramp up production in 2 years? Didn't we have an article about Toyota raving about taking a vehicle to production in 18 months time just a couple of months ago? Don't we see endless articles on how flexible and how efficient the Asian automakers are? I'm not willing to let them have it both ways. In the automotive market place 2 years is a long time. Like it or not, expectations have it that manufacturers are to design and build new cars in 4 years and are expected to refresh models every 2 years.

It's not like they can just open up a new plant to build these vehicles. And with such short life-cycles as the Japanese have, they can't take the time to tool up a new plant for, what will be, an old model. The first generation Prius was in short supply, and Toyota upped the output (about double or so) for the second generation. Now, Toyota is looking to up the capacity of the NEXT generation Prius again.

The problem with flexibility is that it works when all of your products are similar. When you've got a fleet of FWD transverse-engined ICE cars and crossovers, you can move production from here and there. When you have ONE hybrid vehicle, production doesn't easily move.